Monday, April 27, 2009

Investigation of CIB Practices

Previously I called for a study of the City of Indianapolis' goals for downtown and how to reach them. I now call for an investigation of the money management practices of the Capital Improvement Board over the past twenty-five years. I think it could illuminate how we got to this point in the CIB's financial mess, but it might also bring to light debt management issues that should be questioned more broadly than just the CIB.

Here are some areas I can think of, that should be looked into. You can add your own.

Many are making generalized statements about deficit spending by the CIB since 2000. The documents available online at show detailed comparative data only since 2001, due to an accounting method change. Much of the public focus on the CIB's financial mess has revolved around the new Colts contract with the City (2005) and the operating expenses for the new Lucas Oil Stadium. There is no doubt all of that should be gone over with a fine toothed comb. But I would add that in the late 1990's, then Mayor Goldsmith renegotiated the contract with the Pacers - guaranteeing them a median league income no less, and built them a new stadium, Conseco Fieldhouse, whereby they could make money beyond what their team alone brought in. How did these additional costs affect subsequent annual 'profit and loss' statements?

Also, have the bonds to build the old Market Square Arena ever been paid off or were they rolled into other bonds? We know that the old Hoosier Dome - turned RCA Dome - is now gone, yet we, the taxpayers are on the hook for $70,000,000 when it originally cost only $55,000,000 to build. Have we done the same thing with the MSA? Why was debt allowed to grow like this?

According to the Conseco Fieldhouse website, it cost $183 million to build. Yet, information provided by the Indianapolis Bond Bank that covered the CIB's bonds, show two outstanding bonds for Conseco Fieldhouse. Still due as of June 30, 2008, was $191 million and $14 million. There is a third bond entitled 'Conseco Fieldhouse Cash Flow Funding' with an outstanding amount of $34 million. What is that? Is it related to the $34 million still owed to the Circle Center Mall investors, or are we looking at an additional $34 million on top of the bonds? Not to leave well enough alone, there is a fourth bond for the Virginia Avenue Garage, built primarily for the Pacers along with Conseco Fieldhouse, and part of the City's contract with the Pacers. At an initial cost of $25 million, the outstanding amount was $5 million last year. All taken together, CIB debt related to the Pacers as of June, 2008, was $244 million for facilities that cost a total of $208 million to build ten years ago. And, it is not clear if the Circle Center Mall investors' $34 million has been accounted for in this tally.

The same document shows two RCA Dome bonds. Again as of June 30, 2008, $45 million and $25 million were still outstanding. Recapping, we have an outstanding debt of $70 million for a building that cost $55 million to erect.

In addition to the Lucas Oil Stadium bonds, which are held by the Indiana Stadium & Convention Center Building Authority, the Indianapolis Bond Bank floated a $74 million bond/loan on behalf of Jim Irsay so he could fulfill his $100 million 'contribution' to the cost of building the LOS. That bond was floated in 2007 and not one dime in principal had been paid by April 1 of this year (2009). Those bonds need to be examined as well.

The Convention Center costs may have had an alternate fate - actual reduction of debt. The best I can find online is that the Convention Center cost $26 million to build in 1984, and the 2001 expansion cost $84 million. As of June 30, 2008, the CIB still owed $21 million and $59 million on two bonds that are labeled 'Convention Center'. So, $80 million owed for a building that cost $110 million to build. One still must ask why only $5 million has been paid off the original cost from 25 years ago.

Those of you who take advantage of the only sports venue that is actually affordable for most of us living in Indianapolis, Victory Field, rest assured that only $5 million was still outstanding on a bond for that facility as of June last year.

Debt in general and debt management needs to be examined in Marion County. But, an investigation of the finances of the CIB could lead the way.

The taxpayers deserve clear answers of how we got to where we are today when it comes to our sports teams. We need to know that the mess can actually be put behind us and is not going to explode in our faces yet again due to long term disregard for the actual costs of operating these facilities, sweetheart contracts to retain professional sports teams in a small market, and irresponsible debt service.


Jon said...

Certainly we need to examine all of the dealings of the CIB but how? The only people that can appoint or recall them are all politicians. The mayor appoints 6 of the members, the city council appoints 2 more and the controlling party in Marion County appoints the final member. None of these politicos wants to air any dirty laundry about these guys because they are afraid of the fallout.

Then there are the gifted few who receive the largess of CIB, a couple of billionaires. They plead their cases in the media often in mediums in which they spend tremendous amounts of advertising dollars. The 'billionaires' buy the influence of both parties through campaign contributions, free tickets to events and the occasional junket to CanCun.

What chance does the taxpayers have to contain and control this quasi-political agency? To quote Robert Reich among others, "socialism for the rich and capitalism for the poor" is very much in vogue here in Indy.

Had Enough Indy? said...

Jon - thanks for leaving your comments.

I would not be surprised to see the Republicans in favor of an investigation. They certainly entertain blame only for the Peterson Administration and nobody before then.

I also have a firm belief that the public does have some weight with politicians, even if it isn't a reasonable amount. If the public demanded it during Council hearings on new taxes (assuming the Legislature enables them), it could happen. We have to keep trying or we'll never get better government.